ANZ Banking Group boss Mike Smith has revealed his growing concern at how rising interest rates are affecting the ability of some consumers to repay their loans.

He said yesterday poor credit quality was a concern because people were not paying off their credit cards.

Mr Smith's comments on ABC television follow Westpac chief Gail Kelly who, earlier last week, acknowledged a rise in consumer arrears, but said it was not at a level to cause the bank a loss.

Mr Smith said poor credit quality at this time was strange because it normally occurred during periods of rising unemployment.

He said it now appeared to be seasonally related, noting "a little bit" of a situation where people were going on holidays and not repaying the monthly debt on their credit cards.

"But I think that interest rates are beginning to hurt a little bit now, so the recent rises are beginning to bite," he said, adding that the Queensland floods had contributed to the issue.

He also made clear his view that he didn't expect credit growth to return to the levels that had been seen before the global financial crisis.

He said both corporate and consumer credit growth had slowed because people were more cautious while others were trying to boost savings.

He said manufacturing, retail and tourism were feeling the effect of a strong Australian dollar and would have to change their business models to compete in a world where there were cheaper imports.

Mr Smith said the Aussie dollar would continue to rise.

"I think we will see it move through $1.10 and get even stronger than that," he said.

"I can't see anything that will knock it off the perch because it's not only the strong Australian dollar, it's also the weak US dollar.

"When you think about what is happening in the States, I can't see them increasing rates for at least 18 months."

On political matters, the banking chief said a carbon tax was inevitable, adding that he was encouraged by there now being more debate between government and business, because the government had "to understand the implications and consequences."

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Comments on this story

Small Business Owner of Rural Aus Posted at 3:37 PM May 09, 2011

We're only using our credit card for business because some suppliers only accept credit card payments. That said, whilst many of our customers have taken goods and services delivered, they have not paid their bills which in turn makes us unable to pay off a rather substantial credit card bill. At present, business is turning down badly enough that we can just about manage to pay our technician but not ourselves, instead, digging into our savings to feed the family, let alone pay off any extra debts such as the credit card. And that's across the board for many, many small businesses in the area.

Chris of Brisbane Posted at 2:55 PM May 09, 2011

Oh please - if they refused you a credit card you would complain. Nobody from the bank makes anyone sign up for a card and once you have a card nobody from the bank makes you buy stuff with it. Can't afford stuff, don't buy it - simple

the other bob Posted at 1:41 PM May 09, 2011

Chop your credit cards up and throw them in the bin and your problem is solved.
"This 2% rise in credit card debt would add approx $1.92 per week or $7.90 per month approx" - If an extra $2pw in interest is leaving you short, you may as well just give up. People are just whining for the sake of it now.

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